Minimum Energy Efficiency Standards: What do Landlords need to know?

The Minimum Level of Energy Efficiency Standard Regulations

Since 1 April 2018, it has been an offence under the Minimum Level of Energy Efficiency Standard (MEES) Regulations (‘the Regulations’) for private landlords to grant new residential tenancies if the Energy Performance Certificate (EPC) rating is below and E (i.e. F or G) unless a valid exemption applies. The Regulations apply to both residential (domestic) and commercial properties (non-domestic).

The Energy Efficiency (Private Rental Property) (England and Wales) (Amendment) Regulations 2019 (SI 2019/595) (‘the Amendment Regulations’) came into force on the 1 April 2019. From 1 April 2020 it is an offence for private landlords to let (or continue to let) any residential property which has an EPC rating of F or G.

This means that if a Landlord is letting a residential property then they need to ensure it has an EPC rating of at least E, unless an exemption applies. The Regulations apply to residential properties let on assured tenancies, regulated tenancies or domestic agricultural tenancies. They apply only where the property has been marketed for sale or let or modified in the past ten years.

What are the Exemptions?

Whilst landlords are required to carry out works to meet the minimum EPC rating of E, they are not required to spend more than £3,500 (incl VAT) on those works.  A ‘high cost’ exemption applies if sub-standard property cannot be brought within the minimum EPC rating of E at a cost of £3,500 or less.

The other exemptions are:

• where all relevant improvements have been made but the property remains sub-standard
• where wall insulation is not appropriate for the property
• where consent has been sought and refused for the improvement needed
• where the improvements would devalue the property by more than five per cent
• where a person has become a landlord suddenly and needs time to comply with the Regulations on the basis the works are done as soon as possible

Exemptions are not automatic. Landlords must register an exemption with the PRS Exemptions Register before letting the property. Exemptions apply for only a limited period and need to be renewed and registering the exemptions can be very time consuming.

What are the Penalties?

The maximum penalty imposed by a local authority is a fine of £5,000 per property. For Landlords with a portfolio containing a number of substandard properties the fines can soon add up as once one property is identified then it is likely the others will be brought  to light.

As the Regulations now apply to all let residential properties it is likely that we will see more enforcement from local authorities as they no longer need to investigate when the tenancy was granted.

Compliance and Covid-19

Landlords may have other concerns during the coronavirus pandemic but should still take time to review their portfolios and make improvements where required.

The Ministry of Housing, Communities & Local Government have issued guidance for EPC assessments to be carried out in line with the social distancing measures in response to the outbreak.

Commercial Letting – 1 April 2023

From 1 April 2023, the Regulations will also apply to existing commercial tenancies. Current commercial landlords have only 3 years to make any necessary improvements and should start thinking now about what improvements will need to be made or what registered exemptions they may need to apply for before then.

Cost of Works

There is often a question as to who is responsible for the cost of works. What is payable by the Landlord or Tenant in each case will depend upon what works are needed and the terms of the particular lease.